Your first goal for setting you an emergency fund is to aim for £500. This is a small achievable amount. Then gradually aim for 3-6 months living expenses. This should give you plenty of time to find another job, discover your true passions in life (and how you can make money from it), launch your business without the pressure and stress of instantly earning a profit or give you time to heal if the emergency fund is set aside for health reasons.
9 Ways To Help Create An Emergency Fund (F.Y.F)
1. Figure Out What Your Monthly Burn Rate is
Take time and review your current outgoings, then create a spreadsheet and enter everything you have coming in and everything you have coming out.
What is the minimum amount of money you will need should anything unexpected happen to your monthly pay cheque? This should include any and all debt.
Examples are; mortgage/rent, utilities, any health plans and insurances, grocery budget, credit card debt, gas money and a small amount of spending money each week.
2. Set Monthly Savings Goals
Get into the habit of setting aside a portion of your pay cheque every month. By breaking the total amount down into small bite size figures, the idea of setting up an emergency fund will feel a lot less daunting.
Create a standing order from your main chequing account to your emergency fund account. Then you won’t have to think about doing this every month, it’ll automatically be done for you.
3. Ask yourself what can be cut from your monthly budget.
You have be brutal and truly honest with yourself. There is ALWAYS something that can be cut out.
4. Include any dividends and commissions
Keep doing this until you have your 3-6 month cushion, even if it takes a couple of years.
5. Include any tax refunds
Whenever we receive a tax refund most people see it as free money, but this is far from the truth. This is the money you have gotten up at 6am or finished a 12 hour shift for. You have worked bloomin’ hard for this money so don’t waste it. It might feel a little uncomfortable as in the past you have used this to ‘treat yourself’ but the best gift you can give yourself is the gift of freedom and this is what it will create.
6. Set up a side hustle.
I am a huge believer in setting up a side hustle, never put all your eggs in one basket (money solely relied on your day job).
Ask neighbours if they need any jobs doing around their homes for example.
7. Look into your insurance premiums.
Are you paying too much? By spending as little as an hour you may be able to save yourself hundreds a year. I recently reviewed my current contents insurance policy and by spending a couple of hours on comparethemarket.com, I have found a better premium that offers more cover and I have saved over £10 per year, I know this isn’t a lot but spread over several other things, I may save hundreds. I have got more .. from my buck.
8. Consider consolidating your debt.
By doing a balance transfer onto one credit card from multiple cards, you may save yourself hundreds of pounds per year. Visit price comparison websites and find the best credit card that offers the best transfer fee and for the long period. Once you have found a suitable card where you can better meet the repayments, set up a direct debit and then you can forget about sending money every month and missing any repayment fees.
9. Look into your current cell phone plan.
Are you on the best plan for your usage? You may be paying three times as much as you need to. My current data plan is 3GB per month however, I have been offered an extra 5GB for an extra £7 per month. But I don’t even use the 3GB in my current plan. At the surface of it, 5GB sounds that a bargain, however, if I don’t need the extra gigabytes, is it really a bargain?
Until next time …